Dan Caplinger

(TMFGalagan)

Oct 17, 2016 at 5:23PM

Image source: Cliffs Natural Resources.

Monday began the new week on a downward note for the stock market, as investors reacted negatively to oil prices falling back below the $50-per-barrel level, while others worried about the consumer and healthcare sectors. Even with some prominent companies reporting solid quarterly results, many market participants are nervous about whether the new earnings season will bring more positive or negative surprises. Yet even though major market benchmarks finished with declines of around a quarter-percent, many stocks managed to post decent gains. Among the best performers were Quality Systems (NASDAQ:QSII), Cliffs Natural Resources (NYSE:CLF), and SUPERVALU (NYSE:SVU).

Is Quality Systems looking for a deal?

Quality Systems jumped 8% on reports that the healthcare information management systems provider had hired consultants to help it explore strategic options, including a possible sale of the company. The stock has gotten hit hard lately, trading at levels the shares haven't seen since the mid-2000s, and investors had grown impatient about the company's future prospects. Given the potential of the healthcare information space as electronic records and other initiatives start to take shape throughout the industry, Quality Systems could make a smart pick-up for a range of possible buyers, and investors are excited for the first time in a while that the company might finally be looking more seriously at the option going forward.

Cliffs climbs upward on hopes for a steel recovery

Cliffs Natural Resources gained 6% after an article in Barron's pointed to a potential recovery in steel stocks. As a producer of iron ore, which is an important material in steel production, Cliffs Natural is directly exposed to the health of the steel industry. Over the weekend, Barron's suggested that a recovery in steel could send shares of U.S. Steel upward by as much as 50% in a single year. That helped stoke interest not just in the steel company but also in Cliffs and other producers of the raw materials needed for steel. Investors have tried to call bottoms for the steel sector before with limited success, but some still believe that Cliffs has so much upside potential that it's worth the downside risk.

SUPERVALU sells out

Finally, SUPERVALU rose 6%. The grocery-store chain confirmed that it would sell off its Save-A-Lot discount chain to a Canadian private equity company, collecting $1.37 billion and saving itself the trouble of spinning off the unit as a separately traded stock. The buyout is expected to close in early 2017, and SUPERVALU will use more than half of the cash to pay down existing debt. To ensure a smooth transition, the company also agreed to a five-year services agreement to provide certain support functions for Save-A-Lot going forward. Overall, the move is a good end to SUPERVALU's efforts to sell off its discount chain, but it still leaves open the question of how well the company will be able to do without Save-A-Lot.